Google Fiber Facing Financial Woes

Things are seeming to get a bit rocky for Google’s Fiber project. A few weeks ago we reported on the project’s shift away from fiber optics cable and towards wireless, citing the costs of digging up roadways as the major reason. Today, Google’s parent company, Alphabet, is putting some serious pressure on the Google to cut costs. Alphabet CEO, Larry Page hopes to reduce the customer acquisition costs to one tenth of their current level while asking Fiber chief Craig Barratt to cut the unit’s workforce in half from roughly 1000 employees to around 500.

Wow.

These changes signify a split at Alphabet over how it handles Google’s most ambitious projects. Many of these ideas (including the self driving car) have incredible resource investment because they represent the company’s big ideas for the future. However, Larry Page and co-founder Sergey Brin spun some of those prjects out last year when Google restructured itself as Alphabet.

Fiber seems to be in some very uncertain waters right now as the project looks to using lower cost equipment and fewer employees to provide internet. By the end of 2014, Fiber was only able to sign up 200,000 subscriber, while hoping to reach 5 million at the end of 2015. Looks like they have quite a ways to go… Google Fiber is currently available in seven major metropolitan areas with hopes to reach sixteen more cities. It cost the project more than $1 billion to lay down the fiber optic piping in Kansas City and the cost is expected to increase with each new market.

Alphabet CFO, Ruth Porat has been a much bigger advocate for the Fiber team. explaining to Page that the Fiber business model is valuable and needs more time to see results. It’s still unclear how the Fiber unit will crack the technical problems involved. Alphabet’s chairman, Eric Scmidt believes that investment in millimeter wave technology could hold the key since its cheaper than digging up roadways.

While Google looks to shift its sights from fiber to wireless, it remains to be said whether the company will be able to provide the same Gigbit internet speed that they promised during the launch of the project.